Mixed Broadleaf Forests

Company Sells Carbon Credits

by Aaron Gettinger

Arkansas Democrat Gazette

A Conway company is the first in Arkansas to prepare timberland owners’ property for the sale of carbon credits, generating profit through the aggregate management of many small properties in the South and enabling entities that buy the credits to reduce their greenhouse gas emissions.

That animals take in oxygen and breathe out carbon dioxide and plants take in carbon dioxide and emit oxygen is common knowledge in a fifth grade science class, but trees themselves store a great deal of carbon within their wooden structures.

Corporate buyers, essentially, pay the landowners to not clear cut their investments. The idea is that the carbon stays sequestered in the forest, in the trees, as a credit (worth a metric ton of carbon dioxide other entities can buy in exchange for the carbon they emit).

“NativState is a forest carbon company, and for most people, especially in this demographic, it’s very new to them,” founder and president Stuart Allen said of landowners in an interview. “What that means is, from a landowner’s perspective, a corporate buyer has carbon emissions, whether it’s electricity use, barrels of oil they’re producing (or) coal that they burn, they have an emissions footprint associated with their scope of work.

“Forest carbon is a quantification of carbon, first of all: how much carbon is stored in the forest. Then it’s basically conserving that forest so that we know that the carbon stays conserved for a minimum of 40 years. It continues to sequester carbon over that time, as that forest grows,” he said. “We facilitate both sides of that: we develop the projects, quantify it, build out the forest carbon product, partner with the landowners and then sell those credits to the corporate buyers.”

He said the amount of measurements taken are much more robust than a traditional timber inventory: tree diameters and heights are taken to determine specific gravities of 42 tree species that grow in Arkansas; NativState has eight foresters on staff.

With that data, registered and audited by third parties, the company can determine how much carbon is stored per tree, tree after tree, acre after acre. It adds up to tons of carbon.

“When you talk about sequestration, a lot of people get this misconception that there’s nothing to it, landowners are just growing trees anyway. We hear all that,” Allen said. “When we talk about a forest carbon program, carbon sequestration, we start off with the actual molecular weight of each tree species out there. We go out and do a survey on the property, a forest carbon inventory, and we go measure every tree out there. We do it through plots.”

Timberland only applies for forest carbon programs if it’s in danger of being cut: already conserved land, such as that preserved by The Nature Conservancy, cannot apply for credits, a principle known in the industry as “additionally.”

Buyers’ discrimination of credits from different kinds of timberland varies from agnostic, buyers who just want apples-to-apples credits at the best price, to interested, as the preserved timberland relates to their own interests.

Forest carbon projects can also conserve a great deal of water, and timberland can buffer streams and creeks that flow into the Mississippi River.

A petroleum engineer by training, Allen always conceived of carbon as a tax that had to be paid to do his job.

He got interested in forest carbon when he was thinking about what to do with Faulkner County bottomland hardwood he bought during the pandemic, realizing that he could generate income through selling credits instead of clear cutting it: “A big corporation is paying me not to go out there and clearcut that forest and release all that carbon out into the atmosphere. It’ll continue sequestering carbon, essentially, for at least 40 years.”

To his knowledge, NativState (pronounced “native state”: “I never said I could spell, though I can work some numbers, said Allen), is the only local forest carbon developer in Arkansas, though out of state firms operate here. Company Vice President of Marketing Mark Z. Fortune said NativState’s focus on smaller landowners, 40 acres and up, is a distinction compared to its competitors. That’s because his own landownership near Conway only enumerated a few hundred acres while competitors mostly worked with tracts in the tens of thousands.

Private landownership of that size is rare in Arkansas, and Allen sensed a business opportunity through aggregating the state’s smaller parcels together for forest carbon.

He incorporated NativState on Jan. 1, 2021; today, it represents around 300,000 acres in nine different Southern states, with an office in Monroe, La., and aspirations to expand beyond the region.

Average sized plots are around 500 acres. Until last year the primary investor in the company, Allen has raised capital from family and business associates.

Each 10,000 acres constitutes a project.

Its first forest carbon project started in May 2022, and the company issued its credits in March.

“We are profitable for the month of April when we were selling credits,” said Allen. “We look to be very profitable by the end of this year, as more projects roll off. We do have credits already on take for a very large portion of the projects we have coming due this year. As long as those projects come across the finish line in the next few months, we will be very profitable in 2024. Trust me, it’s taken a lot of capital to get us here.”

Landowners get a per-acre advance upfront, 50% to 60% of the revenue from the carbon credits over the first five years, anywhere from $300 to $800 an acre, followed by a yearly payment that depends on the fluctuating price of carbon credits.

Carbon credits are a commodity; today, Allen said revenue ranges from $50 to $90 an acre a year.

“It’s not a ton of money, but it’s a nice, steady check that is also providing all the co benefits of this carbon program,” he said. Landowners also get forest-management and wildlife biology plans from NativState, which also offers no cost enrollment in the American Tree Farm System, the national nonprofit that certifies private forest landowners’ sustainable land management practices.

NativState started out by soliciting individual landowners and still does, but much of its enrollment now comes from word of mouth.

Allen said he is upfront to landowners that forest carbon credits aren’t a match for someone trying to immediately capitalize their investment.

Clear cutting generates much more revenue today than carbon credits do, but clear cutting, obviously, negates the aesthetic, recreational and conservation utility of the land.

And revenue from carbon credits can pay off property taxes and then some for landowners.

They can still harvest timber sustainably, at times and scale so that that which is cut down doesn’t exceed growth on the property, allowing for both carbon and timber revenue.

Active forest management is encouraged, Allen said — controlled burns, hack-and-squirt applications of herbicide to control undesirable vegetation, targeted cuts to open up canopies for wildlife and timber stand improvement — rather than just letting the property go to seed.

“These trees, they get old and they die,” Allen said. “So there is a real opportunity to grow really mature forests and also harvest some of those old trees out there for economic value. It’s changing the active timber management, but it’s still very much active timber management.”

The elephant in the room is climate change.

“I take an all of the above approach,” said the fossil fuel industry veteran. “This is about resource-management and if we can do it better. Whether that’s from oil and gas production — which I spent a lot of time in as a young engineer, working on oil and gas projects around the country — to now timber.”

“My question is how you bring this holistic approach, bringing everybody together to solve a problem. Do I believe in climate change? I tell you this: when I was younger, I broke ice every duck season on Thanksgiving. It seemed like we were breaking ice down here late November during duck season,” Allen said. “This is just a simple man’s view on climate change: I can’t tell you over the last eight years if I broke ice even during the first half of December while I was duck hunting.”

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